TS TECH Co., Ltd. Business Report FY ended Mar. 2017

Financial Overview

(in millions of JPY)
FY ended Mar. 31, 2017 FY ended Mar. 31, 2016 Rate of Change (%) Factors
Sales 425,794 458,732 (7.2) 1)
Operating income 34,557 39,279 (12.0) -
Ordinary income 35,792 40,766 (12.2)
Net income 19,622 23,528 (16.6)


Factors
1) Sales
-Sales decreased year-over-year (y/y) due to the effect of negative currency translation because of the high valuation of the yen, in spite of the fact that the Company received more product orders from customers.


-Even though there were no new launches of new models, the Company worked to reduce costs by (1) establishing high-efficiency production lines in Suzuka, Mie Prefecture, which are designed to specifically build small cars such as K-cars, (2) raising efficiencies in other production plants in Japan through initiating operations based on automated delivery and transport equipment, and (2) revamping the layout of welding lines.
-Sales (including internal sales), which were impacted by the effect of negative currency translation, fell by JPY 91,830 million y/y (a 0.3% decrease).
-Operating income, which decreased JPY 7,343 million y/y (a 19.8% decrease) fell because of the effect of negative currency translation and increased R&D expenses.


-Production was launched in North America of seats and interior products for the Honda CR-V, and seats for the Honda NSX.
-The Company installed integrated welding lines, which are a new type, at all of its production plants to improve productivity in line with the launch of the redesigned Honda CR-V.
-TS TECH Alabama, LLC. launched production of a third-seat frame for the all new Volkswagen SUV, at the new addition to its plant building.
-The Company won an order for trim covers from Volkswagen in Brazil
-Sales (including internal sales) fell by JPY 213,000 million y/y (a 13.8% decrease) due to the effect of negative currency translation because of the high valuation of the yen and due to negative changes made to the model lineup.
-Operating income fell by JPY 12,365 million y/y (a 13.7% decrease) due to lower sales and the effect of negative currency translation.


-Production of seats was launched for the Honda Avancier and Gienia.
-The production plant of Guangzhou TS Automotive Interior Systems Co., Ltd. was completed in Zengcheng County, Guangzhou, in line with the city redevelopment project. It has since launched operations. The production plant has optimum product flow due to the integrated production line layout. In addition, in working to improve production efficiency, the plant has the fastest production lines within the Group as a result of the installation of new-type foam-molding machines.
-Sales (including internal sales) fell by JPY 94,000 million y/y (a 1.6% decrease) due to the effect of negative currency translation because of the high valuation of the yen, even though the number of product orders from customers increased and positive changes were made to the model lineup.
-Operating income increased by JPY 16,425 million y/y (a 1.6% decrease) due to positive changes made to the model lineup, although currency translation and higher labor costs had a negative impact on income.

<Asia, Europe>
-In the UK, production of seats for the Honda Civic were launched; while in India, production of seats for the Honda BR-V was launched.
-TS TECH Bangladesh Limited, which is positioned as the Group’s center of operations to deliver trim covers globally within the Group, launched cutting and sewing operations.
-Sales (including internal sales) increased by JPY 59,825 million y/y (a 1.0% increase) because the number of product orders received from customers increased, although the effect of negative currency translation because of the high valuation of the yen had an impact on sales.
-Operating income fell by JPY 3,313 y/y (a 29.1% decrease) due to expenses incurred to cutover to producing products for new vehicle models, higher overhead expenses, a series of temporary expenses, and the effect of negative currency translation.


Major contracts in FY ended Mar. 2017

OEM/Model Name Launch schedule Production Products
Honda "CR-V" December 2016 North America Seats, Doors
Honda "Avancier" October 2016 China Seats



Mid-term business plan

-The Company, in launching its 13th mid-term management planed called 2020 Vision: Innovative Quality Company, which covers the fiscal year ending in March 2018 up through the fiscal year ending in March 2020, aims to create the foundation for establishing an ESG-oriented management framework.
-There are three fundamental pillars, outlined below, to becoming the world’s top company through focusing on quality, product competitiveness, localized management, and human-resources development.

  1. Sustainable business growth
  2. Diversified management
  3. Coexistence with the social environment

Outlook for FY ending Mar. 2018

(in millions of JPY)
FY ending Mar. 2018
(Forecast)
FY ended Mar. 2017
(Actual Results)
Rate of Change
(%)
Sales 435,000 425,794 2.2
Operating income 40,000 34,557 15.8
Ordinary income 41,500 35,792 15.9
Net income 23,000 19,622 17.2



Outlook:

  • Japan: The Company predicts that sales will be higher because it expects to receive an increase in the number of product orders from customers, although there will be some changes to the model lineup.
  • Americas: The Company predicts that sales will be higher because it expects to receive an increase in the number of product orders from customers.
  • China: The Company predicts that sales will be lower because of changes to the model lineup, although it expects to receive an increase in the number of product orders from customers.
  • Asia/Europe: The Company predicts that sales will be higher because it expects to receive an increase in the number of product orders from customers and positive changes will be made to the model lineup.

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

R&D Expenditure

(in millions of JPY)
FY ended Mar. 31, 2017 FY ended Mar. 31, 2016 FY ended Mar. 31, 2015
Group 12,300 13,600 12,900

-R&D expenses in the fiscal year ending March 2018 are forecast to be JPY 13,400 million, a 8.2% increase y/y.

R&D Facilities

Name Location
Technical Center Tochigi Pref., Japan
Engineering Center Tochigi Pref., Japan
Safety Technical Center Tochigi Pref., Japan
TS Tech Americas, Inc. Ohio, U.S.A.
TS Tech Asian Co., Ltd. Bangkok, Thailand
TS Tech Deutschland GmbH Tappenbeck, Germany
Guangzhou TS Tech Automotive Interior Research & Development Co., Ltd. Guangzhou, China

-The Company will centralize development support operations like computer analysis in the Philippines. According to its 13th midterm business plan that starts from fiscal year 2017, the company will gradually transfer its development support operations from Japan, the U.S. and other countries. TS Tech will increase the number of staff at its Philippine business center, which opened in the spring of 2016, to 200 (a five-time increase from the current number) by the end of March 2021 in order to enhance its development support capability. The company will centralize its general operations required for product development at its Philippine office, and utilize redundant development resources in Japan and other countries for advanced technology research and development. The company is aiming to survive competition by efficiently creating advanced, new products. (From an article in the Nikkan Jidosha Shimbun on January 18, 2017)



R&D Activities

Automotive Business
1) Safety technology
-In working to improve the performance of automotive safety features, the Company is analyzing information on seats and interior products based on safety regulations in every country, studies on assessments, and data on real-world collisions. Based on the results, the Company is working to develop products that offer greater levels of safety performance.
-The Company is creating products by conducting research on features that mitigate passenger impact from collisions coming from every angle; and on ways to prevent accidents by reducing drowsiness.

2) Environmental technology
-The Company is making products lighter in weight by developing environmentally friendly materials; integrating products based on optimum designs; and developing new, processing technology.

3) Technology responding to product appeal and comfort
-The Company is developing mechanisms that offer a myriad of easily adjustable seating positions, based on the customers' perspectives.
-The Company is developing parts for various electronic-control devices designed to provide safety and comfort.
-The Company is developing processing and decorating technology that create a feeling/sense of high quality.
-The Company is conducting fundamental research on physiology in collaboration with academia, as an initiative on the pursuit of comfort.
-As an initiative for creating new product innovations, the Company launched a companywide project that searches for "true appeal" demanded by users.

Capital Investment

(in million JPY)
FY ended Mar. 31, 2017 FY ended Mar. 31, 2016 FY ended Mar. 31, 2015
Japan 2,804 2,233 4,158
Americas 3,733 7,026 9,114
China 3,495 6,153 3,678
Asia/Europe 1,165 1,650 4,066
Total 11,199 17,064 21,018

-The Company is planning to spend JPY 9,300 million in capital investments in the fiscal year ending in March 2018, which is a 55.6% y/y decrease.



Planned Capital Investment

(As of Mar. 31, 2017)
Plant Location Investment targets Planned amount of investment (in millions of JPY) Start End
Head office Saitama Plant Saitama Pref., Japan New company building 1,348 Apr. 2017 Mar. 2018
Home office Hamamatsu Plant Shizuoka Pref.,
Japan
Facilities to manufacture automobile and motorcycle seats 511 Apr. 2017 Mar. 2018
Head office technical center Tochigi, Pref.,
Japan
Facilities for testing automobile and motorcycle seats, and interior-parts dies 668 Apr. 2017 Mar. 2018
Guangzhou TS Automotive Interior Systems Co., Ltd. Guangdong, China Buildings, and facilities and equipment to produce seats for four-wheel vehicles. 567 Apr. 2017 Mar. 2018
Wuhan TS-GSK Auto Parts Co., Ltd. Hubei, China Equipment to produce seats and interior products for four-wheel vehicles. 723 Apr. 2017 Mar. 2018